Write a 1000 to 1250 word analysis of the case, following APA format
Begin the paper by briefly summarizing the main events of the case. Then identify any and all problematic issues in the case and try to pinpoint the ‘root cause’ of these conflicts or difficulties. Who, if anyone, was to blame for the problems that this organization faced? Why did these organizational actors make the decisions that they made? What does leadership theory and managerial best practice tell us about how these problems should have been addressed? Finally, you should recommend a solution to the problems experienced by the organization. In this case, if you had been Ron Johnson, what would you have done differently to put J.C. Penney’s on the road to success?
Base your analysis on research. In other words, don’t just offer ‘armchair theories’ or ‘off-the-cuff opinions’ that cannot be supported by solid evidence from leadership literature. I will know that you have done your research when I see ample in-text citations in APA format throughout your narrative– entries like (Smith, 2017) after a sentence or paragraph in which you have drawn information and ideas from an article, book or online publication by Smith. I should then be able to consult your ‘Reference’ page to see the full bibliographic citation.
J.C. Penny Case Study
J.C. Penny Case Study
Case Study Summary
The current case study is about how a company referred to as J.C. Penny changed its CEO in a bid to improve the generation of revenue. From the 2000s, the company had been struggling to keep up with its competitors (Harbin & Humphrey, 2015). Shareholders found it necessary to bring some changes to revive the company’s lost glory. Through the influence of hedge funder, Mr. Ackman, J.C. Penny hired Ron Johnson as the CEO. Mr. Johnson had a proven record working at Apple as the Vice President in the retail department and as a CEO in Target (Harbin & Humphrey, 2015). When Johnson took over as the CEO of J.C. Penny, he brought wholesale changes such as completely changing the retailing strategy of the company, firing all executives, and bringing in new ones as well as reducing the number of employees. He abruptly scraped what he perceived as the company’s dubious pricing strategy of marking up prices and offering discounts, coupons, and promotions. During Johnson’s 17-month tenure, he invested hundreds of millions in various activities in an attempt to revitalize the company. Nevertheless, most of his efforts to revive J.C. Penny did not work. Revenue deteriorated abruptly and feedback from employees and customers was continuously negative. The company’s share price decreased by a whopping 50% (Harbin & Humphrey, 2015). Customers rebelled, which led to traffic decline and fall in sales, forcing the company to return to previous pricing policies of lots of price-based ads, promotions, and marked-up prices that would be later marked down.
Lessons Learned
One of the huge mistakes made by Johnson was possibly introducing several changes too quickly without adequately testing what would be the effects of such changes. One of the leadership failures evident in this case study is the failure of a leader to understand the culture of the organization. Organizational culture refers to the way of doing things in an organization. Every organization has its unique way of doing things, and this culture is passed from a generation of employees to another (Stouten et al., 2018). Prior to the appointment of Johnson, J.C. Penny had perfected on marking down the prices of merchandise during sale events and such prices were fixated on discounts, promotions, and coupons. Subsequently, customers regarded shopping at J.C Penny as a treasure hunt for massively marked-down merchandise. When Mr. Johnson took over as the CEO, he observed that nearly three-quarters of merchandise in the company was sold at a 50% discount. He believed that this was the first area where change was needed and he thought that rather than marking up the price tag and then using huge discounts on goods to attract shoppers, it would be necessary to initiate a new pricing strategy that he termed as fair and square every day. Doing this was a huge mistake because he brought abrupt changes to the company’s culture (Stouten et al., 2018). By reducing promotions, discounts, and coupons, Johnson eliminated a culture of pursuing markdowns, which was a core characteristic of the company’s conventional customers since it was established. Undoubtedly, the J.C. Penny needed a change to compete with other companies favorably. However, making abrupt changes in the company’s culture was detrimental and failure was imminent. It is advisable that leaders take precautions as far as bringing a particular change to the culture of an organization is concerned. Any change to the organizational culture should be gradual, considering the fact that it takes several years to build the organizational culture (Higgins & Bourne, 2018). Mr. Johnson forgot that J.C. Penny and Apple or any other company he had worked in earlier operated in different contexts and it was crucial for him to first assess the environment that his new company operated in.
When an individual assumes a leadership position in a new company, they require a social network with the executives of the new firm (Osborne & Hammoud, 2017). Immediately after becoming the CEO of J.C. Penny, John sacked all top executives at the company and brought in new ones, whom he thought would help him implement his new policies. Although this act would refresh the stagnant management, Johnson could not obtain a social network of former management. In an organization, a significant number of people resist change and may not trust the individual who has introduced the change (Osborne & Hammoud, 2017). When Johnson assumed the CEO position at J.C. Penny, he faced the challenge of building trust and forming alliances. The easiest way to quickly achieve this was to take advantage of the already established management social network and reputation. He should have at least retained one or two principal executives when he took over.
Another leadership failure evident from the current case study is the failure of Johnson to recognize that mid-level employees are equally important, as are executives when it comes to making key decisions in an organization (Osborne & Hammoud, 2017). Instead, he preferred formulating the plan for change from the above. In an arrangement where executives are not in touch with the operations of stores, they may have perceptions that do not correspond to reality on the ground. For any successful transformation, it is crucial for the CEO and other top leaders to engage mid-level employees in planning as well as implementing change in an organization. This type of engagement significantly increases the chances of achieving success (Osborne & Hammoud, 2017). If Johnson involved mid-level and even junior employees in making some of his key decisions, maybe the situation would be different.
Most leaders fail to learn from their mistakes, and they usually keep on repeating the same mistakes, making it difficult for them to save the sinking ship (Amitabh, 2012). This is exactly what Johnson did at J.C. Penny as he continued with his new business policies despite failing miserably. Johnson did not learn from his former boss, Steve Jobs. Jobs experienced a massive failure at Next after being fired from Apple. However, when he was given a second chance at Apple, he achieved a stunning success after learning from his failures at Next. Similarly, Johnson should have used his perceived failure as an opportunity to turn around J.C. Penny’s situation.
Recommendations
From a personal point of view, although the company should not go back to its old strategy that threatened its survival, it should double down on the shopping that is cheap and fun. Introducing a strategy of deeply discounted goods should be the part of the game as far as reviving the company is concerned. Another option is that J.C. Penny should still go Johnson’s way and eliminate the mismatch between the existing executives and the business strategy, the product line, the culture, the sales and marketing policies as well as the customer base. Since Johnson’s strategy worked at Apple, with the right execution, it can also work at J.C. Penny. The mistake Johnson did was rushing in re-positioning low-end bargain store to a high-end one without careful planning and implementation. In the first place, Johnson’s idea was not flawed as he wanted to offer better products and being more honest with customers. However, he wanted to achieve this too fast.
References
Amitabh, M. (2012). Learning from mistakes. Journal of Motilal Rastogi School of Management 5(2):22-31. SSN: 0974-4037
Harbin, J., & Humphrey, P. (2015). JC Penney and Ron Johnson: A Case of Failed Leadership: Lessons to Be Learned. Journal of the International Academy for Case Studies, 21(6), 131.
Higgins, D., & Bourne, P. A. (2018). Implementing Change in an Organization: A General Overview. Scholarly Journal Of Psychology And Behavioral Sciences, 1(1), 7-18.
Osborne, S., & Hammoud, M. S. (2017). Effective employee engagement in the workplace. International Journal of Applied Management and Technology, 16(1), 4.
Stouten, J., Rousseau, D. M., & De Cremer, D. (2018). Successful organizational change: Integrating management practice and scholarly literature. Academy of Management Annals, 12(2), 752-788.
